Euro vision

Regional Focus: Baltic States

There is more to Estonia and the other Baltic States than the Eurovision Song Contest.

Lawyers who can see past the kitsch have a window on Russia and Scandinavia, writes Michael Gerrard

Estonia came to the attention of millions around the world this year as host of the Eurovision Song Contest, but many British lawyers seem incapable of seeing beyond the kitsch.

The three Baltic states - Estonia, Latvia, and Lithuania - have developed greatly in the decade since winning their independence after 50 years of Soviet rule, and would appear to offer rich pickings for UK law firms keen to establish entry points to both the Russian and Scandinavian markets.

City firm Ince & Co's Latvian lawyer Norair Babadjanian notes: 'The Baltic states provide Western-style service with an ability to speak Russian.

They are a natural gateway from the West to Russia, so any interested business should look at establishing itself there first.'

He notes that such a position has led to Latvia becoming a regional banking centre for Russian businesses looking westwards and vice versa.

But surprisingly many, especially the larger City law firms, have held back from making inroads there.

This is despite the fact that all three countries are on-track to full membership of the European Union, with 2004 being the earliest possible date for their entry.

Typical is the response of one City solicitor who prefers not to be named: 'There are no large companies there who can afford our fees, and because of the size of the economies there is not a lot of scope for large international law firms.'

Such an attitude saddens Mr Babadjanian, who says that many of the biggest law firms follow the so-called Goldman Sachs principle and do not look at business worth less than 200 million.

This hands-off attitude from many, although not all, large law firms, has given an opportunity for smaller players to lay their claims in nations which are western in outlook and entrepreneurial in spirit.

This is how 16-partner Cheltenham firm BPE (formerly Bretherton Price Elgoods) comes to be expanding its operations throughout the Baltic states (see [2002] Gazette, 30 May, 8).

BPE partner John Beevor first met Estonian lawyers during a Rotary Club exchange six years ago.

Now the firm enjoys a formal association with leading Tallinn firm HETA, with which it hopes to open offices in Latvia and Lithuania over the next three years.

The firm's managing partner, Malcolm Price, contends that after rough experiences with expensive international management consultancy firms, the Baltic states have no desire to be swamped by the large UK or US law firms.

He says: 'Working there is particularly of interest to us, because the size of the Baltic states in relation to the other European states is comparable to ourselves and other law firms - so work that might interest us might not interest the likes of Clifford Chance.'

In terms of work, BPE finds itself engaged in corporate and commercial activities with the countries, in particular Estonia, becoming magnets for foreign investment, especially from Scandinavian and German companies.

The firm also finds itself in demand to conduct international arbitration.

Mr Price says: 'The Baltic states traditionally trust the British legal system, so when they are looking to put together international contracts they look towards the UK for arbitration services.'

The high standards of the British legal system have further been promoted throughout the region by the British Law Association for Estonia, Latvia and Lithuania, which has promoted seminars on such topics as good judicial and advocacy practice.

One of the organisation's leading lights is Richard Coles of City firm Shaw & Croft, a firm that specialises in shipping, a staple industry of the region alongside timber, fishing and fish processing.

He has been a regular visitor to the area for the past seven years and during that time has seen it blossom into a Western-style economy.

He says: 'The transformation in the last five to six years has been quite amazing.

They have gone from driving Ladas to Lexus and BMWs.'

This new-found prosperity has also been linked to development of the region's three capital cities - Tallinn in Estonia, Latvia's Riga and Vilnius in Lithuania - with the lustre returning to their medieval centres, replacing the grim concrete and glass structures built in the Soviet era.

These cities, especially Tallinn and Riga, once thrived as trading ports in the Hansiatic League and so it can be argued that they are merely returning to their traditional ways.

The area's shipping interests acted as a spur to one English law firm, which has established an office adjacent to the region.

Ince & Co set up an office in the German port city of Hamburg last October, to service that important market and to act as a convenient launching pad for the Baltic states a short distance across the sea.

Resident partner Jonathan Lux says: 'These states are springboarding towards development at a pace.

Baltic people are naturally entrepreneurial and although the economies are individually small they are interesting nevertheless.'

He maintains that the region currently does not offer enough work to justify offices in their own right, but that with Germany being such a vital partner in the Baltic region, Ince & Co is ideally placed to provide advice on the firm's key practice areas: shipping, insurance and international trade.

Beyond shipping firms with a natural interest in such a seafaring area and the enterprising BPE, it seems a handful of large firms have dispensed with the blinkers and appreciate the opportunities presented by the Baltic region.

Both CMS Cameron McKenna and PricewaterhouseCoopers' associated law firm Landwell have given the area attention, with the latter establishing offices there.

These developing states are centres for privatisation and regulatory work as well as harmonisation in preparation for EU entry.

On top of which the legal interests of the many foreign companies with bases in the region have to be catered for.

Landwell partner Paul Downing, global head of corporate development, says: 'I think in terms of trade routes, there is significant trade around the Baltic from Scandinavia, the US and Russia.

Following these trade patterns determines where we are based.'

Meanwhile, CMS Cameron McKenna recently advised on the 23 million (14.8 million) privatisation of Estonian Railways.

The firm's co-ordinating partner for central and eastern Europe, Duncan Weston, says that as the Baltics have been developing near enough from scratch in the last decade, there is plenty of work to be had for a law firm with a presence in the area.

He says: 'What they are doing is putting hundreds of years of development in place, in a very short time period.

The whole place is becoming more sophisticated.'

This development has been fired by investment from foreign banks and development agencies such as the European Bank for Recon-struction and Development; Mr Weston says there is a lot of money sloshing about the place.

This new sophistication naturally provides many opportunities for UK law firms, a situation which can only develop further once the three states gain accession into the EU.

Mr Weston says that 2004 may come too soon, even for Estonia, the region's strongest economy, but that in the longer term it will happen.

Once the Baltic states are EU members, then British firms will find themselves conducting business very much as they do within the existing EU.

Given the welcoming response that BPE has received from its Estonian partner HETA, the Baltic respect for the British legal system and the fact the Law Society reports as yet no practising rights wrangles, it appears that British firms should find it an easy place to work in.

And as the region's economy grows, there is every chance that more will take advantage.

Michael Gerrard is a freelance journalist